By Ryan Felton
say overall it has slowed sharply when inflation is taken into account. Retailing-giant
Walmart Inc. and consumer-products firm Procter & Gamble Co. both warned this week that
higher prices were leading shoppers to pull back, an ominous sign for the U.S. economy.
initiating widespread layoffs, and to respond to other pressures, such as higher commodity
costs, rising interest rates and factory shutdowns in Asia related to rising Covid-19 infections.
economic challenges worsen.
Electric-vehicle makers Tesla Inc. and Rivian Automotive Inc. have disclosed plans to cut
thousands of salaried workers following earlier hiring sprees.
bolster its transition to electric-vehicles. In coming weeks, the Dearborn, Mich., auto maker is
expected to disclose plans to cut more than 4,000 white-collar workers, The Wall Street
Journal reported earlier this month.
“We absolutely have too many people in certain places, no doubt about it,” said Ford Chief
Executive Jim Farley Wednesday. He didn’t confirm or respond directly to questions about the
workforce reductions.
Auto executives and dealers say the industry overall is in a much stronger position than it was
in previous downturns. It is also aided by somewhat unusual conditions: The prolonged
inventory crunch on dealer lots has led to accumulating pent-up demand and buyers willing
to pay a hefty premium for cars and trucks that are available.
Mike Manley, chief executive of publicly traded dealership chain AutoNation Inc., said if there
is an economic downturn, consumers’ appetite for mid- to higher-priced vehicles, including
those in the luxury category, is likely to remain strong.
“If we are going to go into a recessionary period, that’s going to be the middle to the last
demographic that gets hit,” Mr. Manley said. AutoNation, earlier this month, said as many as
50% of the vehicles that are incoming to its dealerships over the next few months are presold,
and some models, such as the Ford Bronco, are sold out for more than a year.
Meanwhile, the average price paid for a vehicle continues to nudge higher, hitting another
record in June of $45,844, according to industry research firm J.D. Power.
And more buyers are taking out bigger car payments. The number with auto loans costing at
least $1,000 a month hit a record 12.7% in June, according to Edmunds, a car-shopping
website and data-analytics company.
Stellantis CEO Carlos Tavares said Thursday that the company’s global shipments could fall
about 50% and it would still break even. He said he believes Europe is more at risk of a
recession and the U.S. would have a milder downturn.
“We have a very low break-even point,” Mr. Tavares said this week on the company’s earnings
call. “That is going to give us significant sustainability to face any unpredictable crisis.”
on the industry’s outlook. GM’s sales in the second-quarter were disproportionately hit by
Jacobson said. “This one was a little late breaking.”
The supply constraints are depressing sales, which in the U.S. were down 18.2% industrywide
to 6.7 million vehicles in the first six months, according to Wards Intelligence, a firm that
tracks auto industry data.
Affordability is also becoming a bigger concern as surging car prices have pushed many
budget-conscious buyers out of both the new and used car markets. Some executives say once
dealership stock bounces back, it could be difficult for car companies to sustain the premium
pricing.
“Consumer sentiment is all over the map,” Tesla Chief Executive Elon Musk said on the EV
maker’s earnings call this month.
Tesla had its first sequential decline in quarterly profit in more than a year in the second
quarter, hurt by an extended shutdown at its Shanghai plant due to local Covid-19
restrictions. But Mr. Musk said he isn’t concerned about weakening demand for Tesla, whose
customers face monthslong waits for many vehicle configurations.
“We have so much excess demand that was really just not an issue for us,” he said on the call.
– Mike Colias, Elliott and Nora Eckert contributed to this article.